Open Source for Accounting
and Enterprise Systems
State University a New York at Oswego USA
Rochester Institute at Technology LISA
This chapter introduces open source software (OSS) for accounting and enterprise information systems.
It covers the background. functions, maturity models, adoption issues, strategic considerations, and
future trends for small accounting systems as well as large-scale enterprise systems. The author hope
that understanding OSS for financial applications will not only inform readers of how to better analyze
accounting and enterprise information systems but will also assist in the understanding of relationships
among the various functions..
This chapter will inform the readers about the
feasibility and potential applicability of open
source software (OSS) to the functional areas of
accounting and finance. Small and enterprise-
scale systems will be examined. The chapter will
review background information and frameworks
for analyzing the business case related to financial
applications of OSS.
()SS systems can provide support to indi v id ual
business functions or integrated suites of func-
tions. For example. open sou rce enter prise systems
provide an integrated set of business functions that
are organized around business processes.
In this chapter, we will address the concerns
of managers and educators who are interested
in learning more about open source business
systems. We studied available OSS accounting
and financial applications by reviewing available
documentation on Web sites. For a number of
enterprise applications we reviewed, the system
functionality and market positioning, downloaded
the systems and studied system requirements.
installed and set up the systems. and reviewed
the license agreements. Initially, the chapter will
review the current state of OSS business systems
with a focus on definitions and functional appli-
cations of small accounting systems and larger
enterprise systems. We will then address the
critical factors and decision frameworks relevant
to the adoption OSS for accounting and financial
applications. In addition. we will explore future
trends in ()SS financial reporting systems.
BACKGROUND OF OSS
In this section, we will discuss the business issues
that are a required background in order to have a
general understanding of accounting and financial
applications with OSS. Open source is used to
describe "a software program or set of software
technologies that are made widely available by an
individual or group in source code form for use.
modification, and redistribution under a license
agreement with having very few restrictions"
(American Bar Association. 2006). The logic be-
hind the open source philosophy is that users must
be able to read. redistribute. and modify the source
code for a piece of open source soft ware. In contrast.
a traditional software I icense is designed to protect
the intellectual property of the software developer
and severely restricts reading. redistributing, and
modifying source code. Since an open source
license gives broad rights to read, redistribute,
and modify the source code for a piece of OSS
users constantly improve the OSS by adapting it
to various applications and fixing bugs.
The intellectual and legal origin of most open
source license agreements can he traced to two
sources: the GNU General Public License (GPI.)
and the University of California BSD Unix license
agreements(McGowan. 2001). These agreements
reflect the goal of creating a community environ-
ment in which innovation and quality improve-
ments are rapidly shared and distributed through
common ownership of intellectual property
rather than through individual or organizational
ownerships th rough copyrights (Kennedy. 2001).
Improvements made by individuals are made
publicly available back to the community.
Statistics available from www.freshmeat.net
(Freshmeat, 2006), a Web site described as one
of the largest indexes of Unix and cross-platform
OSS, indicates that these two license forms (or
close revisions of them) account for almost 80%
oft he license agreements used by projects tracked
on the site. Since 20% of the projects utilize dif-
ferent types of agreements, users must examine
carefully the license agreement of the system
they want to use.
We downloaded and reviewed the license
agreements for a number of enterprise. account-
ing, and financial applications (see Tables I and
2). For this sample. The GNU General Public
License was the most common agreement. it is
important to note that as the target market for these
systems moves toward large enterprises. coin me r-
cial licenses and hosted licenses emerge (Tustena
CRM, 2006). Given the variations of licensing
agreements demonstrated in this sample, users
must carefully compare the license agreement
with the requirements of their organi zations.
The trade press and other publications em-
phasize that OSS is about back-office technology
such as servers and operating platforms. The
relevance of OSS to functional areas, including
accounting, finance and enterprisesystems. is not
well understood. Historically, OSS has focused
on technology components such as the L inux
operating system and the Apache Web server.
Open source business applications are beginning
to emerge, the most familiar being OpenOffice,
an OSS application office suite supporting word
processing, presentation, and spreadsheet ap-
plications. Now available as OSS is a variety of
accounting, financial and enterprise systems ap-
pl ications. Reflecting the potential these offerings
have in the marketplace, venture capital is flowing
into open source business applications, which be
an indicator that these OSS business applications
will play a significant role in the future (Cook.
2004; Marshall, 2005; Stein, 2005).
Finding operating systems and servers to
support the various open source accounting and
finance (A&F) systems (except venture capital)
is not a problem. Microsoft (MS) Windows,
Timm (Red I Ian, Solaris (Sun).BSD. Mac OSX.
and UNIX all have accounting applications that
run on their platforms. OSS systems will run on
most popular servers such as Microsoft. Apache
(the most popular server with more than 50% of
all installations), Sun, and so forth. Table I dis-
plays sonic of the more well-known OSS small
accounting systems and the operating systems
they require (Sourceforge, 2006).
To compile Table 1, we went to SourceForge
and checked all software under the Topic menu
listed as office/business -> financial -> account-
ing. This identified more than 500 systems as of
June 2006. We then identified all systems rated
as mat ure, stable. or production. Many systems
display the term accounting under topics, but
we question whether some of these systems are
true accounting systems. Therefore, we exam-
ined company Web sites to determine through
product information if the systems were capable
of most traditional accounting functions. In ad-
dition. we checked to determine if the company
was still actively operating and if the software
was current. We also reviewed recent journal
articles on the subject to see- if the companies
were cited. We understand that this market is
in a continual state of change and many new
products arc appearing. We feel that we have
highlighted most of the more well-known sys-
tems. but we may have missed a few. Certainly,
the OSS accounting market would benefit from
In addition to small accounting applications.
there are other business applications available
in the form of OSS systems. For example. func-
tions such as personal financial management.
e-commerce, office suites (e.g.. spreadsheet.
word processing. database, graphical presenta-
tion). Web browsers. R DIM (relational database
management). c-mailing clients, and strategic
planning are all as ailable in OSS. The enter-
prise scale accounting systems usually interface
with a relational database as well as with other
applications. Table 2 displays some of the more
well-known OSS enterprise scale accounting
systems and summarizes the target market ap-
plications. database, and license requirements of
each system (Compicre. 2006: GNUCash. 2006:
Sourceforge 2006: Ti R P. 2006; Tustena CR M.
2006; WebERP, 2006).
Most open source accounting and finance
(A&F) systems work very well with relational
database systems. As a matter of fact. sonic open
source systems run on open source RDBM sys-
tems. For example. Compiere runs on MySQL,
a mature and stable open source RDBM system.
Even though there are many related applications
that work with A&F systems. this chapter will
focus mainly on the financial applications of
these systems. However, we will briefly discuss
closely related applications since they interface
with A&F applications.
MAIN FOCUS OF FINANCIAL OSS
SYSTEMS: FUNCTIONS AND
In this sect ion. we first will describe the functions
of small and enterprise-scale A&F systems. and
then we will discuss the frameworks as well as
the considerations used to evaluate these systems.
Evaluation criteria w ill include quantitative finan-
cial models and qualitative maturity and strategic
Small-Scale Business Systems
A&F systems can be viewed as a functional set
of application modules that can be mixed and
combined. Traditional OSS modules support func-
tions such as general ledger, accounts receivable.